Nigerian bourse ended the last trading week on a very impressive note. Buying pressure among high and medium capitalized stocks pushed the Sub-Saharan Exchange to a market capitalization above the N18 trillion mark, as the Nigerian debt market becomes more unattractive, with recent 364-day Nigerian treasury bills going for 0.3%.
Abiodun Keripe, Managing Director, Afrinvest Research, in a note to Nairametrics, spoke on why Nigerian Stocks are rallying higher
“Last week, the domestic bourse continued the positive run as the market gained on all trading days save on Friday.
“Consequently, the benchmark index spiked 13.0% w/w to 35,037.46 points, buoyed by sharp gains in ZENITH (+21.7%), BUACEMENT (+20.9%), and DANGCEM (+14.6%). As such, market capitalization advanced by ₦2.1tn to ₦18.3tn, while YTD return surged to 30.5%.
“Also, there was a sharp increase in activity level as average volume and value traded rocketed 134.1% and 160.4% to 901.9m units and ₦11.7bn respectively.
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“Ten most traded stocks by volume were FBNH (398.9m units), ZENITH (360.3m units), and ACCESS (263.2m units) while ZENITH (₦9.3bn), GUARANTY (₦5.0bn), and MTNN (₦4.2bn) led by value.”
However, Michael Nwakalor, a Macroeconomist at CardinalStone Research, in a phone chat interview with Nairametrics, spoke on why it seems the Stock rally might suffer from some sort of exhaustion, as seen in its last trading session.
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“Stock prices are becoming expensive as a consequence of consecutive weekly gains for the ASI. Several counter shave hit their 2-year highs without substantial changes to their earnings trajectory. Nonetheless, I expect buying sentiment to persist this week, albeit punctuated by profit-taking, as some of the fundamental drivers of the rally remain in place; low fixed income yields and a paucity of investment alternatives.
“Buying activity may also be more subdued as stock prices have become less attractive and as liquidity levels are expected to be lower than in recent weeks. Meanwhile, the quality of much-anticipated earnings releases from banks could have a material impact on market direction in the coming week.”
Abdul-Rasheed Oshoma Momoh, Head, Capital Market in TRW Stockbrokers Ltd, in a phone interview with Nairametrics, concluded that a market correction seems very likely when considering the Elliot wave pattern’s recent reading.
Abiodun Keripe, Managing Director, Afrinvest Research, also warned that the exponential bullish run seen lately at the world’s best-performing stock market, makes traders to be a bit cautious, but he remained bullish for the long term.
“Fundamentally, stocks have heated up so fast and are trading close to our target prices (for the names that are rated by us). This suggests that there is little headroom for further gains from a valuation perspective.
“However, with the quantum of liquidity in the market combined with the strong risk appetite, I expect the Nigerian equities market to maintain a positive performance in the new week. Despite this outlook, I am mindful of profit-taking.“